How Tech Startups are rethinking the traditional organisational structure

When a company doubles in size, productivity drops. This is very different from other kinds of growth where a doubling of size typically sees a gradual increase in productivity. But what is the reason for this?

Modern tech companies see this as a fundamental problem to solve. For them, the root lies in the organizational structure. With the opportunity to be dispersed remotely and to build complex products without factories and production lines, the tech industry is particularly able to pursue innovative approaches to structure, management, and organization.

Elon Musk talks about his businesses innovating the production process as much as the product. Similarly, Mark Zuckerberg describes Facebook’s structures and organization as its biggest asset. So what are the competing philosophies which are driving these trends within the industry? Which companies have implemented the most extreme reorganizations and how have they dealt with the changes?

This article (divided into 2 parts) will be looking at how tech companies are experimenting with moving away from the traditional organizational model. The stereotypical tech company is often portrayed in Hollywood (sometimes without exaggeration) as having unusual work practices: pizza for all, table tennis in every room, and beanbags instead of chairs. While this differs from the stereotypical corporate office of suits, strict bosses, and rigid workplaces, it doesn’t really differ from a Fordian model which might share some simple attributes we take for granted. Loosely gathered from a British Sociological Association Conference paper by Simon Clarke, these might include:

• Employees generally work in departments or teams with fixed scope and responsibilities.
• Employees have a direct line manager and set tasks to complete.
• Employees have clear job titles and predetermined wages for that title.
• Employees are paid enough to buy products and participate meaningfully in the economy.
• Employees are subject to a bureaucratic management hierarchy which is responsible for decisions.
• Employees work in an office with their colleagues.

It is evident that certain elements which we consider part of the normal workplace are being abandoned by new innovative companies in favor of newer models. Lots of organizations have utilized different forms of company structure, and many still do. Mondragón, Spain’s 10th biggest company, is a workers’ cooperative. The International Cooperatives Association’s revised 1966 principles, adapted from the original 1844 Rochdale Principles, are as follows:

The motivations behind the cooperative movement, and Mondragón initially also, were geared to protect workers from the power of capital as the industrial revolution in Britain was in full swing. Similarly, in 1865 reverend Henry Solly founded the first association of working men’s clubs – collectively owned pubs which acted somewhat as community centres, and became one of the most prevalent forms of social institutions in Britain.

Examine the origins of older companies and company structure, you will find implicit or explicit political narratives, yet our new emerging tech companies are not centered around such political goals. The ultimate goal is to make the company more successful. For some, this might mean saving money by reducing overheads: a classic reason why a startup might look to be remote, along with opening up a broader talent pool and access to cheaper labor.

To be clear then, there is nothing new about radically moving away from hierarchy or increasing worker autonomy. What is new is the attempt to deliver these goals in the pursuit of greater profit: for economic rather than moral or political motivations.